United states securities and exchange commission



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 ___________________







(1)

Film obligations include minimum guarantees and theatrical marketing obligations. Production loans represent loans for the production of film and television programs that we produce. Repayment dates are based on anticipated delivery or

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release date of the related film or contractual due dates of the obligation.







(2)

The future repayment dates of the convertible senior subordinated notes represent the next possible redemption date by the holder for each note respectively.







(3)

Distribution and marketing commitments represent contractual commitments for future expenditures associated with distribution and marketing of films which we will distribute. The payment dates of these amounts are primarily based on the anticipated release date of the film.







(4)

Minimum guarantee commitments represent contractual commitments related to the purchase of film rights for pictures to be delivered in the future. Production loan commitments represent amounts committed for future film production and development to be funded through production financing and recorded as a production loan liability when incurred. Future payments under these commitments are based on anticipated delivery or release dates of the related film or contractual due dates of the commitment. The amounts include future interest payments associated with the commitment.







(5)

Excludes the interest payments on the senior revolving credit facility and Term Loan as future amounts are not fixed or determinable due to fluctuating balances and interest rates.

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements and other relationships with unconsolidated entities that will affect our liquidity or capital resources. We have no special purpose entities that provided off-balance sheet financing, liquidity or market or credit risk support, nor do we engage in leasing, hedging or research and development services, that could expose us to liability that is not reflected on the face of our consolidated financial statements. Our commitments to fund operating leases, minimum guarantees, production loans, equity method investment funding requirements and all other contractual commitments not reflected on the face of our audited consolidated financial statements are presented in the above table.


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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Currency and Interest Rate Risk Management

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates. Our exposure to interest rate risk results from the financial debt instruments that arise from transactions entered into during the normal course of business. As part of our overall risk management program, we evaluate and manage our exposure to changes in interest rates and currency exchange risks on an ongoing basis. Hedges and derivative financial instruments will be used in the future in order to manage our interest rate and currency exposure. We have no intention of entering into financial derivative contracts, other than to hedge a specific financial risk.



Currency Rate Risk. We enter into forward foreign exchange contracts to hedge our foreign currency exposures on future production expenses denominated in various foreign currencies. As of March 31, 2012 , we had outstanding forward foreign exchange contracts to sell British Pound Sterling £10.7 million in exchange for US$16.9 million over a period of six months at a weighted average exchange rate of one British Pound Sterling equals US$1.58. Changes in the fair value representing a net unrealized fair value gain on foreign exchange contracts that qualified as effective hedge contracts outstanding during the year ended March 31, 2012 amounted to less than $0.1 million and are included in accumulated other comprehensive loss, a separate component of shareholders’ equity. These contracts are entered into with a major financial institution as counterparty. We are exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of replacing the contracts, at current market rates. We do not require collateral or other security to support these contracts.

Interest Rate Risk. Certain of our borrowings, primarily borrowings under our senior revolving credit facility, Term Loan, certain production loans and the Film Credit Facility, are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net loss would increase. The applicable margin with respect to loans under the senior revolving credit facility is a percentage per annum equal to 2.50% plus an adjusted rate based on LIBOR. The applicable margin with respect to loans under the Term Loan is a percentage per annum equal to 4.50% plus an adjusted rate based on Alternative Base Rate Loans (as defined therein) and 5.50% plus an adjusted rate based on LIBOR loans (subject to a LIBOR floor of 1.25%). The applicable margin with respect to loans under the Film Credit Facility is a percentage per annum equal to 3.25% over the “LIBO” rate (as defined in the Film Credit Facility agreement). Assuming the senior revolving credit facility and the Film Credit Facility are fully drawn, based on the applicable LIBOR in effect as of March 31, 2012 , each quarter point change in interest rates would result in a $0.9 million change in annual interest expense on the senior revolving credit facility and $0.3 million change in annual interest expense on the Film Credit Facility. Assuming the Term Loan outstanding balance and based on the applicable LIBOR in effect as of March 31, 2012, a quarter point change in interest rates would result in a $1.2 million change in annual interest expense. The variable interest production loans incur interest at rates ranging from approximately 3.49% to 3.99% and applicable margins ranging from 3.00% over the one, three, or six-month LIBOR to 3.25% over the one, three or six month LIBOR. A quarter point increase of the interest rates on the outstanding principal amount of our variable rate production loans would result in $0.8 million in additional costs capitalized to the respective film or television asset.
The following table presents our financial instruments that are sensitive to changes in interest rates. The table also presents the cash flows of the principal amounts of the financial instruments with the related weighted-average interest rates by expected maturity dates and the fair value of the instrument as of March 31, 2012 :

 
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Year Ended March 31,

 

Fair Value

 

2013

 

2014

 

2015

 

2016

 

2017

 

Thereafter

 

Total

 

March 31, 2012

Variable Rates:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Revolving Credit Facility (1)

$






 

$

99,750




 

$






 

$






 

$






 

$






 

$

99,750




 

$

99,750




Average Interest Rate






 

2.74

%

 






 






 






 






 

 

 

 

Principal Amount of Senior Secured Second-Priority Notes (2)






 






 






 






 

436,000




 






 

436,000




 

479,055




Average Interest Rate






 






 






 






 

10.25

%

 






 

 

 

 

Term Loan (3)

55,000




 

55,000




 

55,000




 

55,000




 

264,664




 






 

484,664




 

480,423




Average Interest Rate

7.25

%

 

7.25

%

 

7.25

%

 

7.25

%

 

7.25

%

 






 

 

 

 

Production Loans (4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individual production loans

285,567




 

52,393




 






 






 






 






 

337,960




 

337,960




Average Interest Rate

3.77

%

 

3.73

%

 






 






 






 






 

 

 

 

Film Credit Facility

43,942




 






 






 






 






 






 

43,942




 

43,942




Average Interest Rate

3.49

%

 






 






 






 






 






 

 

 

 

Fixed Rates:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production Loans (5):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pennsylvania Regional Center production loans






 

65,500




 






 






 






 






 

65,500




 

63,679




Average Interest Rate






 

1.50

%

 






 






 






 






 

 

 

 

Principal Amounts of Convertible Senior Subordinated Notes (6):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2004 2.9375% Notes






 






 

348




 






 






 






 

348




 

237




Average Interest Rate






 






 

2.94

%

 






 






 






 

 

 

 

February 2005 3.625% Notes






 






 

23,464




 






 






 






 

23,464




 

19,295




Average Interest Rate






 






 

3.63

%

 






 






 






 

 

 

 

April 2009 3.625% Notes






 






 

66,581




 






 






 






 

66,581




 

59,083




Average Interest Rate






 






 

3.63

%

 






 






 






 

 

 

 

January 2012 4.00% Notes






 






 






 






 

45,000




 






 

45,000




 

35,619




Average Interest Rate






 






 






 






 

4.00

%

 






 

 

 

 

Other Financing Obligations (7)

3,778




 






 






 






 






 






 

3,778




 

3,778




Average Interest Rate

8.02

%

 






 






 






 






 






 

 

 

 

 

$

388,287




 

$

272,643




 

$

145,393




 

$

55,000




 

$

745,664




 

$






 

$

1,606,987




 

$

1,622,821




 ____________________







(1)

Senior revolving credit facility, which expires July 25, 2013 bears interest of 2.50% over the Adjusted LIBOR rate.







(2)

Senior secured second-priority notes with a fixed interest rate equal to 10.25%.







(3)

The Term Loan matures on September 7, 2016. The Term Loan is repayable in quarterly installments equal to $13.75 million , with the balance payable on the final maturity date. The Term Loan is also repayable periodically to the extent of the excess cash flow, as defined, generated by Summit and its subsidiaries (see Note 9 to the audited consolidated financial statements). The Term Loan bears interest by reference to a base rate or the LIBOR rate (subject to a LIBOR floor of 1.25% ), in either case plus an applicable margin of 4.50% in the case of base rate loans and 5.50% in the case of LIBOR loans.







(4)

Amounts owed to film production entities on anticipated delivery date or release date of the titles or the contractual due

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dates of the obligation. Production loans of $338 million incur interest at rates ranging from approximately 3.49% to 3.99% . Not included in the table above are approximately $15.0 million of production loans which are non-interest bearing.







(5)

Long term production loans with a fixed interest rate equal to 1.5% .







(6)

The future repayment dates of the convertible senior subordinated notes represent the next possible redemption date by the holder for each note respectively.







(7)

Other financing obligation with fixed interest rate equal to 8.02%.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Auditors’ Report and our Consolidated Financial Statements and Notes thereto appear in a separate section of this report (beginning on page F-1 following Part IV). The index to our Consolidated Financial Statements is included in Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.


ITEM 9A.     CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We periodically review the design and effectiveness of our disclosure controls and internal control over financial reporting. We make modifications to improve the design and effectiveness of our disclosure controls and internal control structure, and may take other corrective action, if our reviews identify a need for such modifications or actions.
As of March 31, 2012, the end of the period covered by this report, the Company's management had carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective.
Internal Control Over Financial Reporting
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that:










pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;












provide reasonable assurance that (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and (b) that our receipts and expenditures are being recorded and made only in accordance with management's authorizations; and












provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Our management has made an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2012. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our evaluation and conclusion on the effectiveness of internal control over financial reporting as of March 31, 2012 did not include the internal controls of Summit because of the timing of this acquisition, which was completed on January 13, 2012. As of March 31, 2012, Summit represented $965.9 million of total assets,
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$186.0 million of revenues and $27.1 million of net loss for the year then ended.
Based on this assessment, our management has concluded that, as of March 31, 2012, the Company maintained effective internal control over financial reporting. The effectiveness of the Company's internal control over financial reporting has been audited by the Company's independent auditor, Ernst & Young LLP, a registered public accounting firm. Their report is included below.
Changes in Internal Control over Financial Reporting
We acquired Summit on January 13, 2012, and the addition of Summit's financial systems and processes represent a change in our internal controls over financial reporting. There were no other changes in internal control over financial reporting during the fiscal fourth quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Lions Gate Entertainment Corp.
We have audited Lions Gate Entertainment Corp.'s internal control over financial reporting as of March 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Lions Gate Entertainment Corp.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management's Report on Internal Control over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Summit Entertainment, which is included in the 2012 consolidated financial statements of Lions Gate Entertainment Corp. and constituted $965.9 million of total assets as of March 31, 2012 and $186.0 million and $27.1 m illion of revenues and net loss, respectively, for the year then ended. Our audit of internal control over financial reporting of Lions Gate Entertainment Corp. also did not include an evaluation of the internal control over financial reporting of Summit Entertainment.
In our opinion, Lions Gate Entertainment Corp. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Lions Gate Entertainment Corp. as of March 31, 2012 and 2011, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2012 of Lions Gate Entertainment Corp. and our report dated May 30, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP

Los Angeles, California

May 30, 2012

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ITEM 9B.     OTHER INFORMATION

None.





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